Bank of America joins the race in developing Bitcoin trading product

15 Sep, 2018
by Richard Allen
Bank of America joins the race in developing Bitcoin trading product

Another Wall Street giant has hopped on the bandwagon and announced the development of tradable Bitcoin product to be made available for clients that will be based on the futures market in aggregate, CoinGape reports.

Bank of America and Merrill Lynch have joined the growing list of Wall Street financial giants that are developing crypto-based products for its clients. If sources are correct, Bank of America is set to develop a tradable Bitcoin product out of fears of losing important clientele as competitors like Goldman Sachs, Citi, and Morgan Stanley have already entered the fray.

Bank of America is reportedly looking into developing a Bitcoin derivative connected to a Non-Deliverable Forward. Investopedia explains the complexity behind an NDF as a cash-settled and generally short-term forward contract. The notional amount is never exchanged, hence the name "non-deliverable." Two parties agree to take opposite sides of a transaction for a set amount of money (in the case of a currency NDF) at a contracted rate. The profit or loss is calculated on the notional amount of the agreement by taking the difference between the agreed upon rate and the spot rate at the time of settlement.

NDFs not only provide exposure to the underlying asset but also provides the opportunity for a variety of arbitrage, speculative and hedging opportunities. This could hint at the type of exposure Bank of America clients are looking for when it comes to crypto. Or maybe it's just the ambiguity around crypto regulation.

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